Staffing cuts likely, layoffs possible as L+M adjusts

New London - Staffing reductions through attrition and possibly layoffs are likely to be announced in the next few weeks to the approximately 3,500 employees of Lawrence + Memorial Hospital and its affiliates.

Bruce Cummings, president and chief executive officer of L+M Healthcare, which includes the main hospital, The Westerly Hospital, Lawrence + Memorial Medical Group and the Visiting Nurse Association of Southeastern Connecticut, said in a memo to staff Tuesday that senior management will meet to decide how to implement recommendations of a consulting firm that has just completed a two-month assessment of all L+M operations.

Berkeley Research Group, based in Emeryville, Calif., was asked to find areas most in need of improvement and suggest actions related to staffing, supply and nonlabor costs, revenue cycles, business office processes, patient length of stay and management of affiliated physician practices, among other areas. Decisions about carrying out the recommendations will also be made with the input of the consultants, members of the board of directors and physicians, Cummings said.

"Job retention is a priority for myself and my colleagues in senior management," he wrote. "Our hope is to rely on routine turnover to achieve (the consultant's) staffing recommendations. But in the spirit of transparency, and in light of the profound changes and challenges upon us and other healthcare organizations, that may not be completely possible."

He said a final plan will be presented to leadership in two to three weeks, and then to all employees. He invited staff to submit questions through the hospital's employee website, www.lmfirsthand.org. Rapidly changing conditions in health care, he said, require the hospital to "pay close attention to our costs while improving our performance."

L+M spokesman Mike O'Farrell emphasized Thursday that no decisions have been made as yet based on the consultant's recommendations, and that all efforts would be made to reduce staff through attrition rather than layoffs.

"Layoffs are never the goal, but given the challenges in our industry, no hospital is in a position to guarantee there won't be any in the future," he said.

Michele Sharp, spokeswoman for the Connecticut Hospital Association, said that hospitals statewide have laid off 1,400 people in the last year and have also cut salaries and benefits, reduced services and postponed purchases of new equipment and capital improvements.

Financial challenges facing hospitals are likely to escalate in July, she said, when a state tax on hospital patients will more than double. A $103 million rescission in state funds to hospitals in December 2012 and $101 million in patient taxes in July 2013 combined to drive income down for all Connecticut hospitals by $175 million in 2013 compared to the previous year, she said.

"In addition to the state cuts and the hospital tax, hospitals are feeling the impact of cuts to Medicare payments and the federal sequestration," she said, adding that Medicare payments were reduced by 2 percent.

She noted that the average operating margin for Connecticut hospitals was 3.27 percent revenues over expenses in 2013, below the 4 percent margin considered the minimum level recommended to maintain healthy operations.

In a May 8 posting on the employee website, Cummings said L+M is "in the midst of a storm" due to a series of recent financial pressures. Among these is the move toward "value based purchasing," in which insurance reimbursements are based on outcomes rather than tests and procedures; Medicare penalties when patients are readmitted in less than 30 days or acquire an infection or other illness while in the hospital; and the increasing number of Medicare patients placed on "observation" rather than "admission" status, resulting in the hospital receiving one-third lower payments.

At the same time, however, patient volumes have been declining steadily at L+M and other hospitals since 2010, he said. From October to February, L+M inpatient volumes declined 2.8 percent. Other hospitals in eastern Connecticut saw a greater loss: 6.4 percent at Day Kimball Hospital in Putnam, 8.4 percent at The William W. Backus Hospital in Norwich, and 24 percent at Windham Hospital, Cummings said.

Cummings said L+M is looking to replace lost revenues by focusing on areas where growth is expected: outpatient services, cancer care and orthopedic services. It is also looking to expand vascular and thoracic surgery in conjunction with Yale School of Medicine faculty physicians; re-establish inpatient pediatrics with creation of a pediatric hospitalist service; recruit new physicians; open urgent care centers; and create a "Value Care Alliance" with hospitals such as Middlesex and Griffin that want to remain independent, nonprofit institutions, Cummings said.

Matt O'Connor, spokesman for the three AFT Connecticut locals that represent nurses, technicians and health care workers, said the leaders of the unions "are ready to work with the administration to ensure that all of their members remain employed.

"In the event of job cuts, unlike in a non-union environment, our members will enjoy contractual protections that are provided by all three contracts," he said. "These rights include bidding on and obtaining open jobs, displacing less senior employees, and recall rights to open jobs in the future."